4 Beaten-Down Stocks Poised for Rebounds - views

NEW YORK (Stockpickr) -- Over the last few years, a clear trading pattern has emerged. The market zooms ahead and then slumps back on a regular basis. Investors buying into dips and selling into rallies have had an ample number of open windows to jump through.

Chipmaker Broadcom (BRCM) hit a 52-week low earlier this week and trades lower than it did five years ago. In that time, sales have doubled and profits have tripled.

Why the selloff? Key customers that use Broadcom’s communications semiconductors found themselves with too much inventory recently and curtailed new orders in the current quarter until that inventory has been whittled off. That means the current quarter -- and the first quarter of 2012 as well -- may come in below forecasts.

Still, the long-term outlook remains quite bright as Broadcom complements its strength in set-top boxes with a big push into smartphones with its next-generation Wi-Fi technology. Another driver: the increasing adoption of 4G LTE technology being used by wireless service providers such as Verizon and handset makers such as Samsung.

Shares now trade for a reasonable 11 times projected 2012 profits, and if you exclude Broadcom’s $5 a share in cash, that multiple falls into the high single-digits.

HomeAway

Might June IPO Home Away (AWAY) be suffering from a technical factor? Insiders will be allowed to sell company stock later this month for the first time as the lockup expiration expires. So other investors may be getting out ahead of that possible selling pressure.

When this stock was in the low $40s this summer, it wasn’t necessarily a bargain, but now trading at lows in the $25-to-$26 range, the shares are worth a fresh look.

HomeAway is the leading operator of vacation rental listings, owning key properties such as its eponymously named site, VRBO.com, vacationrentals.com and others. The company already generates positive free cash flow -- no mean feat for a relatively young company -- and results in 2012 should improve yet further as recent acquisitions are integrated.

Analysts predict that sales and profits will grow in excess of 20% next year. Management succinctly expressed the utility of this business model on a recent conference call: “Property owners still desire to and frankly need to rent out their properties in difficult times.”

After the lockup-related selling abates later this month, this stock could get a second wind in 2012.

Freed-up insiders may also explain the rapid recent drop in shares of rental-car upstart Zipcar (ZIP). The company went public in mid-April, and insiders stopped being “locked up” in mid-November. Are they causing selling pressure? Perhaps, because it’s hard to find another reason behind the sharp drop.

Recent quarterly results surely show no sign of a company in distress. Third-quarter revenue rose 24% from a year ago to $68 million, and analysts anticipate sales rising at a 25% pace in 2012 as Zipcar opens up service in a few more cities. Equally impressive, the company has been focusing on limiting expenses, and just posted its first-ever profitable quarter. Analysts had been expecting a modest quarterly loss.

To be sure, this stock doesn’t look cheap yet based on traditional metrics. The P/E ratio (on projected 2012 profits) is more than 100, but the forward price-to-sales multiple of around 2 looks a lot more reasonable. As EBITDA margins expand (they are expected to rise from 4% in 2011 to 7% in 2012, and perhaps 10% by 2013), net income should rise quickly.

This company has already come a long way. From its founding a decade ago, Zipcar already has 600,000 active users worldwide, and analysts expect that figure to hit one million by 2015. A rising customer base means that more of its cars are being used and not sitting idle. “We believe the company remains early in its growth lifecycle with only 15 markets entered. Moreover, we estimate these existing markets are only 7% penetrated. With plans to enter 2-3 markets annually, we believe Zipcar’s growth could last for many years,” note analysts at Needham, who have a $25 price target on the stock. That’s 60% upside from current levels.

Angie’s List

Recent IPO Angie’s List (ANGI) has been dragged down by a weak stock market these past few weeks. It opened at $18 on Nov. 17 (and showed up a few days later on a list of 3 IPOs Logging a Blockbuster Week), and it can now be had for around $11.50. Its market value is $560 million, and roughly 20% of that value is accounted for by the cash raised at the IPO.

Much of the stock price weakness can be attributed to the fact that few have an understanding of this company’s business model. That should change in the next few weeks as the investment banks that brought the company public task their research analysts with fresh new company reports.

This company may simply be a growing asset that is primed to be sold to a larger company that wants to get into this space. So look for management to use the IPO proceeds to boost marketing and customer acquisition expenses, which should set the stage for robust top-line gains in 2012.